[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18581]
[[Page Unknown]]
[Federal Register: August 1, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34428; File No. SR-NASD-94-31]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change to Eliminate Access
Market Maker Procedures From Schedule D to the NASD By-Laws
July 22, 1994.
On May 25, 1994, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder.\2\ The rule change eliminates
access market maker procedures from Schedule D to the NASD By-Laws.\3\
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\1\15 U.S.C. 78s(b)(1)
\2\17 CFR 240.19b-4
\3\NASD Manual, Schedules to the By-Laws, Schedule D, Part IX,
(CCH) 1864.
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Under the rule as amended, member firms that do not subscribe to
Level III service will no longer be able to qualify for access market
maker status. Prior to the amendment, a firm, with NASD approval, could
enter into an agreement with a Level III subscriber whereby the
subscriber would input two-sided quotations reflecting the dealer
interest of the non-subscribing firm. These quotations would be
displayed with the entering subscriber's market maker identifier along
with a special indicator which would inform other dealers that an
access arrangement existed with respect to the quotation displayed.
While the entering subscriber assumed responsibility for executing
trades at the displayed bid and offer, the entering subscriber and the
access market maker were jointly responsible for compliance with the
various market maker obligations as set forth in Part V of Schedule D
to the NASD By-Laws. The effect of the amendment to the rule is to
limit market maker participation to Level III service subscribers.
Notice of the proposed rule change, as amended, together with its
terms of substance was provided by issuance of a Commission release\4\
and by publication in the Federal Register.\5\ No comments were
received in response to the Notice. This order approves the proposed
rule change.
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\4\Securities Exchange Act Rel. No. 34217 (June 15, 1994).
\5\59 FR 32032 (June 21, 1994).
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As the NASD indicated in its rule filing, changes in market making
practices in recent years have dramatically reduced the use of the
access market maker arrangement. In fact, at the time the NASD filed
the proposed rule change, no NASD member was using the arrangement. The
NASD concluded that the changes in practices and lack of interest
reflected the obsolescence of the access market maker provision. The
NASD also noted that limiting market maker participation to Level III
service will enhance the audit trail and fix the responsibility for
every quotation and reported transaction at the source.
The Commission has determined to approve the NASD's proposal. The
Commission finds that the rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the NASD, including the requirements of Sections
15A(b)(6) and 15A(b)(11) of the Act.\6\ Section 15A(b)(6) requires, in
part, that the rules of the NASD be designed to prevent fraudulent and
manipulative acts and practices; to foster cooperation and coordination
with persons engaged in regulating, clearing, and processing
information with respect to, and facilitating transactions in
securities; and to protect investors and the public interest. Section
15A(b)(11) authorizes the NASD to adopt rules governing the form and
content of quotations disseminated by member firms for the purposes of
providing fair and informative quotations, preventing fictitious or
misleading quotations, and promoting orderly procedures for collecting
and distributing quotation information.
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\6\15 U.S.C. 78o-3(b)(6) and (b)(11).
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The Commission finds that the elimination of the access market
maker feature is consistent with the foregoing statutory provisions.
This amendment will require market maker to subscribe to Level III
service in order to enter quotations into the Nasdaq system This
requirement will eliminate an extra step in the quotation process and
further, inter alia, the objectives of facilitating transactions and
promoting orderly procedures for collecting and distributing quotation
information.
The Commission does not believe that the rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change SR-NASD-94-31 be, and hereby is,
approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\17 CFR 200.30-3(a)(12).
[FR Doc. 94-18581 Filed 7-29-94; 8:45 am]
BILLING CODE 8010-01-M
